China Inflation falls further to 4.2% in November

As expected, inflation in China continues to moderate. The latest data from the National Bureau of Statistics suggest that the headline consumer price index (CPI) increased by 4.2% on an year-on-year basis, down from 5.5% in October, below expectation of 4.5%, driven mainly (and obviously) by the fall in food prices, in which prices increased by 8.8%, down from 11.9%, while non-food inflation was 2.2% for November. On a month-on-month basis, headline CPI fell by 0.2%, with food prices falling by 0.8% and non-food prices increased by 0.1%.

Source: National Bureau of Statistics

Just as expected by the consensus and myself, inflation in China peaked in the summer and moderating towards the end of the year. If this continues, which is likely, we should see more room for reversing some of the earlier monetary tightening (as we saw last week with 50 basis points cut in RRR). Here, though, I am sceptical if that helps (more on that later).